A checking account buffer is a cushion of extra money in your checking account that helps prevent overdrafts and provides peace of mind in case of unexpected expenses. Think of it as a safety net that keeps your finances stable. But it doesn’t fill the place of a full emergency fund which is important for sudden major unplanned expenses.
Still, having a checking account buffer can help you feel peace of mind and avoid going into overdraft. My husband and I used to have a checking account buffer of around $500. But as we worked to pay down debt, saved up to move, and experienced tighter finances due to inflation, we haven’t really had a checking account buffer for some time.
Recently, we decided it was time to rebuild our checking account buffer and I wanted to get it done quickly. Having some money to fall back on that’s easily accessible would benefit most people if not everyone. If you’re looking to build a checking account buffer as well, here’s what you need to know.
Checking Account Buffers Explained
A checking account buffer is a small amount of money that you keep in your checking account as a cushion. It acts as a buffer between your spending and the minimum balance required by your bank. Having a buffer in place also reduces the risk of overdrafts and potential fees.
A good rule of thumb is to keep 30% of your monthly living expenses in your checking account buffer, but this can vary depending on your needs and goals.
Why Do You Need a Checking Account Buffer?
Life is unpredictable, and unexpected expenses can arise at any time. Having a checking account buffer in place can give you peace of mind knowing that you have enough money to cover these unexpected costs without worrying about dipping into your savings or incurring expensive overdraft fees.
Here are some key benefits of saving for this fund:
- Avoid Overdraft Fees: A buffer can prevent costly overdraft fees if you accidentally spend more than you have. These fees can add up quickly and hurt your finances.
- Protect Your Credit Score: Overdrafts can also negatively impact your credit score if they are reported to credit bureaus. A checking account buffer helps you avoid this.
- Emergency Fund Alternative: While a checking account buffer is not meant to replace an emergency fund, it can provide temporary financial relief in case of unexpected expenses or emergencies.
How to Build a Checking Account Buffer Quickly
Building a checking account buffer may seem daunting, especially if you are living paycheck to paycheck. However, with some strategic planning and budgeting, you can build a buffer in no time. Here are some tips to help you get started.
Prioritize and Automate Your Savings
Automating your savings is one of the most effective ways to build a checking account buffer quickly. Arrange for a certain amount of money to be automatically transferred from your checking account to your savings account each week or month. Apps like Oportun to automatically save small, manageable amounts by rounding up your purchases to the nearest dollar and transferring the difference to your savings.
One of the best financial habits you can develop is to pay yourself first. Doing this is easier said than done, but it’s also as simple as it sounds. Whenever you get paid, transfer some money to savings or debt payoff before taking care of your other bills and living expenses. By doing so, you’re putting your financial goals first because no one else will.
Bill companies will make sure you pay them and even make calls and send emails to remind you, but no one reminds you to pay yourself first.
Redirect Some of Your Spending
Reallocating some of your spending, even if it’s only temporary, can help you save more efficiently. Identify non-essential expenses such as dining out or subscription services that you can temporarily reduce or eliminate. Then, redirect these funds to your checking account buffer. Review your budget line-by-line to see which expenses you can reduce or cut.
Things may or may not seem obvious at first, but keep tracking your spending to find key areas that will help you save. This could look like reducing your grocery bill by $50 per month, downgrading your gym, membership level, and canceling other subscriptions. I pay for a skincare line for my son because I really like the products.
However, whenever we’re trying to reach an important financial goal, I often cancel those regular subscriptions and cut down my purchases to only the specific face cleanser and toner we need for the month.
Do Some Extra Work
Increasing your income through side hustles is a great way to accelerate your savings so you can build a checking account buffer fast. My husband and I have been doing focus groups on the side. I’ve also done some mystery shopping gigs these past few months to make extra money. We also sold items from our home in the past and I’ve delivered food for DoorDash while he’s driven for Uber.
Narrow down your skills and interests to find the best side hustle opportunity for you. Also, be honest about how much time you can dedicate to extra work. Some people are super busy with their day jobs and may need a flexible side hustle like freelancing. Or maybe, you can pick up overtime shifts at your current job.
Earn a Credit Card or Bank Account Bonus
Taking advantage of credit card or bank account bonuses can give your buffer a quick boost. This is another thing we did to build our buffer up. My husband actually opened a cash-back credit card that paid a $200 bonus once he spent $500 within 3 months. It was easy to meet that spending threshold when we just paid for groceries with the card for a month and paid the balance off right away.
The cash back in combination with a few focus groups helped us gain a few hundred dollars quickly. If your credit is good and you’re in need of another credit card, check out cash back bonuses because some cards will offer $300 or more at times.
Or, consider changing your bank account and earning a cash bonus that way. Some banks pay you anywhere from $200 to $450+ after 90 days so long as you set up direct deposit and meet some of their other requirements with your new account.
Summary – Build a Checking Account Buffer Now
Building a checking account buffer doesn’t have to be a slow and tedious process. By taking these proactive steps, you can create a financial cushion that offers security and peace of mind for you and your family. Also, realize that your buffer does not have to be huge. Start by just saving $300 to $500 and this will help you feel more secure with your daily cash flow.
